03 February 2019
Mumbai: Expectations of a lower interest rate with further liquidity infusion by the Reserve Bank of India (RBI), coupled with earnings results, may set the course of the key domestic equity indices in the coming week.
Market observers feel that factors like the Indian rupee's movement versus the US dollar, foreign funds' flow direction and global crude oil price fluctuations will also influence investors' risk appetite.
"The RBI policy on February 7 and the remaining earnings announcements for the December quarter will dictate trend of the market," said SMC Investments and Advisors Chairman and Managing Director D.K. Aggarwal.
The Monetary Policy Committee (MPC) is scheduled to meet from February 5 to 7 for the sixth and final bi-monthly monetary policy review for 2018-19. In its last review, the MPC had kept the key lending rates unchanged.
Apart from the monetary policy review, the 2019-20 Interim Budget announcements, like the farm package and enhancement of tax rebate limit, have the potential to keep the market participants interested in the consumption-driven stocks.
According to Essel Mutual Fund's CIO Viral Berawala: "For the week ahead the key drivers would be outcome of the RBI's monetary policy meeting, corporate results and sustainability of FII flow (They have bought Rs 4,300 crore stocks in the cash segment during the last two trading days)".
In terms of the earnings results, companies like Coal India, Cipla, BHEL, SAIL, Tata Motors, Mahindra and Mahindra, Bharat Petroleum Corporation, Vodafone Idea and Tata Steel are expected to announce quarterly financial results in the coming week.
In addition, foreign funds' flow direction and the rupee's movement versus the dollar will be other crucial factors that will determine the market trajectory.
Last week, foreign institutional investors (FIIs) bought stocks worth Rs 4,321.63 crore.
"Next week, the RBI is expected to lower interest rates by 25 basis points. If they do so, the stock market may rally. But the rally could be short lived. The rupee-dollar movement is expected to remain within a range of 70.80 and 72 over the next week," said Anindya Banerjee, Deputy Vice-President (currency and interest rates) with Kotak Securities.
However, on the currency front, the rupee depreciated by 7 paise to 71.25 against the dollar over the previous week.
"The rupee closed at 71.25 after an eventful week... Slower inflows of equity funds till the general elections would keep the rupee under a bit of pressure. We can see 71.55 being retested and the rupee may head towards 72.20 if crude oil goes above $63 to a barrel," said Sajal Gupta, Head of forex and rates at Edelweiss Securities.
On technical charts, the National Stock Exhange's (NSE) Nifty50 is expected to face volatility.
"Technically, while the Nifty has ended with gains this week, it still remains stuck within the 10,534-10,987 trading range since late December 2018," Deepak Jasani, Head (retail research), HDFC Securities, told IANS.
"We expect this choppiness to continue in the coming week as the broad market indices like the Mid-cap and Small-cap indices are still weak."
Last week, budgetary announcements like farm package and enhancement of tax rebate limit pushed the key equity indices -- the S&P BSE Sensex and the NSE Nifty50 -- higher.
Consequently, the S&P BSE Sensex rose 443.89 points, 1.23 per cent, over the week to close at 36,256.69 points on Friday, while the broader Nifty finished at 10,830.95, up 179.15 points.